From the always interesting Erik Erickson at Red State:

So the question is do we want to stop Obamacare or do we want to stop the debt ceiling increase? My view is that we cannot do both at the same time. We might dare to dream, but the debt ceiling will be increased one way or the other.

Right now the GOP is holding up very well in the press and public opinion because it is clear they want negotiations. The GOP keeps passing legislation to fund departments of government. It has put the Democrats in an awkward position.

But the moment the GOP refuses to raise the debt ceiling, we are going to have problems. Remember, the last time you and I wanted the GOP to fight on the debt ceiling, the attacks from our own side were particularly vicious.

They’ve been vicious over the shutdown too, but now that we are here, the water ain’t so bad and only a few ankle biting yappers continue to take shots at conservatives from the GOP side.

It will not be so with the debt ceiling. And the GOP will no longer seem very reasonable. The debt ceiling fight will become an impediment to undermining Obamacare.

The main target is defunding Obamacare. Since the House will cave on the debt limit, not good to link defunding Obamacare to the debt ceiling. Link it to CR. Logic seems good if you like the objective. Also, it reveals that right believes debt limit will be raised. Hence, bondholders can relax.

From National Memo:

A day in the life of the emptiest suit in Washington:

7 a.m. You wake up, light a Camel. Read a pink Post-it left on the refrigerator by your wife: “John, don’t ever forget, YOU REALLY ARE THE SPEAKER OF THE HOUSE!!! Also, we’re out of bagels.”

7:30 a.m. You lie in your tanning bed meditating about the government shutdown, wondering if it was such a brilliant idea to let it happen. You put on some Pink Floyd, “Dark Side of the Moon,” but that doesn’t help.

8:00 a.m. On the ride to Capitol Hill, your driver remarks that there’s not much traffic in the city, no tourists lined up to see money being inked at the Bureau of Engraving and Printing. You smoke another Camel.

Hiaasen has a new book out.

Boredom is wasted on the bored

 

I coach my daughter’s U12 travel soccer team. An important skill that a player of this age should be picking up is the instinct to keep her head up when receiving a pass, survey the landscape and plan what to do with the ball before it gets to her feet.  The game has just gotten fast enough that if she tries to do all that after the ball has already arrived she will be smothered before there is a chance.

Many drills are designed to train this instinct and today I invented a little drill that we worked on in the warmups before our game against our rivals from Deerfield, Illinois. The drill makes novel use of a trick from game theory called a jointly controlled lottery.

Imagine I am standing at midfield with a bunch of soccer balls and the players are in a single-file line facing me just outside of the penatly area.  I want to feed them the ball and have them decide as the ball approaches whether they are going to clear it to my left or to my right. In a game situation, that decision is going to be dictated by the position of their teammates and opponents on the field. But since this is just a pre-game warmup we don’t have that.  I could try to emulate it if I had some kind of signaling device on either flank and a system for randomly illuminating one of the signals just after I delivered the feed.  The player would clear to the side with the signal on.

But I don’t have that either and anyway that’s too easy and quick to read to be a good simulation of the kind of decision a player makes in a game.  So here’s where the jointly controlled lottery comes in.  I have two players volunteer to stand on either side of me to receive the clearing pass.  Just as I deliver the ball to the player in line the two girls simultaneously and randomly raise either one hand or two.  The player receiving the feed must add up the total number of hands raised and if that number is odd clear the ball to the player on my left and if it is even clear to the player on my right.

The two girls are jointly controlling a randomization device.  The parity of the number of hands is not under the control of either player.  And if each player knows that the other is choosing one or two hands with 50-50 probability, then each player knows that the parity of the total will be uniformly distributed no matter how that individual player decides to randomize her own hands.

And the nice thing about the jointly controlled lottery in this application is that the player receiving the feed must look left, look right, and think before the ball reaches her in order to be able to make the right decision as soon as it reaches her feet.

We beat Deerfield 3-0.

Leviathan_by_Thomas_Hobbes

 

From political scientist Gary Cox at the Monkey Blog:

The idea goes back to England’s Glorious Revolution, where MPs fought hard to put the Crown on a short financial leash, so that they could control Crown officials’ actions. Although they did not use the term, English arguments about what would give Parliament bargaining leverage vis-à-vis the Crown hinged on the budgetary reversion.  Because expenditure authority would lapse every year, forcing portions of the government to “shut down” in contemporary American parlance, parliamentarians were assured the Crown would seek a new budget every year — whereupon they could bargain for attainment of their various goals.

Eventually the power of the purse meant the monarch became a figurehead, the House of Lords a rubber stamp and power truly resides in the House of Commons. So, the analogy would be that the President becomes an (elected) figurehead, the House of Lords becomes an (elected) rubber stamp and the House of Representatives becomes the center of power. And the Tea Party Republicans want to turn us into Britain!

President Obama may or may not have the constitutional authority to raise the debt limit without Confressional approval. But he has not because:

[S]ome observers outside government in Washington and on Wall Street, citing a game theorylike approach, suggest that the president’s position is more tactical than fundamental, since raising the possibility of a way out for the White House like the constitutional gambit would take the heat off Republicans in Congress to act on its own before the Oct. 17 deadline.

This is Schelling 101 and of course is based on Sun Tzu:

When your army has crossed the border [into enemy territory], you should burn your boats and bridges, in order to make it clear to everybody that you have no hankering after home.

I loved that show. She died last month. Here are 30 selected episodes. Definitely check out the Keith Jarett one.

  1. Facebook’s business problem is that it is the social network of people you see in real life.  All the really interesting stuff you want to do and say on the internet is stuff you’d rather not share with those people or even let them know you are doing/saying.
  2. What is the rationale for offsides in soccer that doesn’t also apply to basketball?
  3. If the editors of all the journals were somehow agreeing to publish each others’ papers what patterns would we look for in the data to detect that?
  4. I need to know in advance the topic of the next 3 Gerzensee conferences so that I can start now writing papers on those topics in hopes of getting invited.

He is as smart as people say:

Sen. Ted Cruz (R-TX) announced Monday his intention to donate his congressional salary to charity for each day government remains closed, pinning blame for any potential shutdown in operations past Sept. 30 on Senate Majority Leader Harry Reid (D-NV).

“Harry Reid should not force a government shutdown,” the conservative firebrand said in a statement. “I hope that Reid stops refusing to negotiate and works with the House to avoid a government shutdown, and, at the same time, prevent the enormous harms that Obamacare is inflicting on the American people.

“If, however, Harry Reid forces a government shutdown, I intend to donate my salary to charity for each day the government is shut down,” he added.

But it turns out his offer came after Democratic Rep Gary Peters:

@SenTedCruz joining me to donate pay to charity, but not to stop shutdown. I urge you to drop politics. Irresponsible to do anything less.

Suppose you are writing a referee report and you are recommending that the paper be rejected. You have a long list of reasons. How many should you put in your report? If you put only your few strongest arguments you run the risk that the author (or editor) finds a response to those and accepts the paper.

You will have lost the chance to use your next few strongest arguments to their full effect, even if there is a second round. The reason has to do with a basic friction of rhetoric.  Nobody really knows what’s true or false, but the more you’ve thought about it the better informed you are. So there is always a signaling aspect to rhetoric. Even if the opponent can’t find a counterargument, when it is known that you rank your argument low in terms of persuasiveness, your argument will as a result be in fact less persuasive.  Your ranking reveals that you believe that the probability is high that a counterargument could be found, even if by chance this time it wasn’t.

On the other hand you also don’t want to put all of your arguments down. The risk here is that the author refutes all but your strongest one or two arguments. Then the editor may conclude that your decision to reject was made on the basis of that long list of considerations and now that a large percentage of them have been refuted this seals the case in favor. Had you left out all the weak arguments your case would look stronger.

It may even be optimal to pick a non-interval subset of arguments. That is you might give your strongest argument, leave out the second strongest but include the third strongest. The reason is that you care not just about the probability that any single one of your arguments is refuted but the probability that a large subset of your arguments survive. And here correlation matters. It may be that a refutation of the strongest argument is likely also to partially weaken the second-strongest. You pick the third because it is orthogonal to the first.

I got this off Tim Hartford’s Twitter feed and he describes it as Prisoners’ Dilemma. I’m not so sure:

First of all, you are not allowed to give any online hints that you are playing. If you do, you cause unending shame to be heaped upon yourself. This defeats the entire purpose.

On each turn, you give your phone (which must have a Twitter client, signed in to your main Twitter account) to another player. For the first turn, you pass your phone to the person at your left, and in exchange you receive a phone from the person to your right. On the second turn, your phone is given the the person two people to your left, etc. When you’ve passed your phone to everyone around the table, the round is over.

When you receive a phone from someone else, it should have the phone’s Twitter client active, with whatever UI there is to make a new tweet. Then you enter in anything you want. Anything. There are no rules to this part. However, and this is very important: DO NOT POST yet. You may get to do that later. Instead, hand the phone back to the owner.

When you receive your phone back, look at the proposed tweet. Then hand it back to the same person who composed it.

If you don’t want them to post it, conceal a $20 bill in your hand. If you want to allow them to post it, put nothing in your hand. Making sure to hide anything that may be in your hand, put it forward onto the table. Wait until everyone has put their hand in, and then all of you must open your hands simultaneously.

If everyone has $20 in their hands, the money goes into the pot for the next round and nothing is posted.

If nobody has $20 in their hands, nothing gets posted.

If some people have $20 and some people are empty-handed, posts happen for those people who didn’t pay up, and the money (including anything already in the pot) is distributed evenly to those people who didn’t pay.

Finally, any tweets made during this game may not be erased at least until the NEXT occasion that the person plays the game.

I guess if you want people to suffer embarassment then no-one giving $20 is not an equilibrium.

Grocery chain Trader Joe’s has opened up a legal can of whup ass on its self-professed “best customer,” Pirate Joe’s.

Vancouver, British Columbia shopkeeperMichael Hallatt, claims to have spent more than $350,000 at Trader Joe’s in the past two years. Trader Joe’s would like him to stop shopping there. What gives?

Hallatt, makes frequent drives across the border to shop the U.S. stores, then resells popular Trader Joe’s branded products in his own store, cannily called Pirate Joe’s.

Various commentators are at a loss to explain why Trader Joe’s would cut off its best customer.  But isn’t it obvious?  Trader Joe’s always had the option of opening a store in Vancouver. Because it never did, it must be that it would not be profitable. Now the joint profits between Trader Joe’s and Pirate Joe’s cannot be higher than the profit that Trader Joe’s would have earned if it opened its own store.  At worst Trader Joe’s could just replicate what Pirate Joe’s is doing, but probably it could do it more efficiently.  So Trader Joe’s which earns only a share of the joint TJ/PJ profit must be less profitable than it would be if it opened its own store in Vancouver which it has already calculated to be unprofitable.

If the federal government shuts down on Oct 1, only essential staff get salaries. Congress is considered essential.

After the government shutdown, there will be a blame game to determine who gets held responsible for the closing of national parks etc. Either or both sides could in principle suffer the negative hit from the shutdown. Each party has to do something to get the upper hand in the argument. The first to renounce their salaries during the shutdown will get the upper hand.  They can say ” We share the pain of the shutdown with the American people and stand in solidarity with them. The other side is not suffering and is inflicting pain on all of us – they have nothing to lose and are advancing an extreme political agenda which is not in the interests of the American people.” The other side will soon capitulate and give up their salaries too. But the second-mover does not reap the rhetorical benefit. There is huge incentive to move first. So, there is a pre-emption game and everyone renounces their salaries.

Here is a nice essay on the idea that “over thinking” causes choking.  It begins with this study:

A classic study by Timothy Wilson and Jonathan Schooler is frequently cited in support of the notion that experts, when performing at their best, act intuitively and automatically and don’t think about what they are doing as they are doing it, but just do it. The study divided subjects, who were college students, into two groups. In both groups, participants were asked to rank five brands of jam from best to worst. In one group they were asked to also explain their reasons for their rankings. The group whose sole task was to rank the jams ended up with fairly consistent judgments both among themselves and in comparison with the judgments of expert food tasters, as recorded in Consumer Reports. The rankings of the other group, however, went haywire, with subjects’ preferences neither in line with one another’s nor in line with the preferences of the experts. Why should this be? The researchers posit that when subjects explained their choices, they thought more about them.

The upcoming Northwestern home game versus Ohio State has now sold out. Danny Ecker at Crain’s Chicago Business has the post-mortem:

Sales so far show the school was effective in its experimental“Purple Pricing” offer for about 5,000 single-game seats for the game.

The modified Dutch auction system, which guarantees that buyers don’t pay any more for tickets than anyone else in their section, ended up selling out at $195, $151 and $126 for seats on the sideline, corner and end zones, respectively.

On the secondary market, sideline seats have sold for an average of $190, corner seats for $135 and end-zone seats for $127. That suggests that fans haven’t been able to flip them for a profit — at least, not yet.

Suppose you and a friend of the opposite sex are recruited for an experiment. You are brought into separate rooms and told that you will be asked some questions and, unless you give consent, all of your answers will be kept secret.

First you are asked whether you would like to hook up with your friend. Then you are asked whether you believe your friend would like to hook up with you. These are just setup questions. Now come the important ones. Assuming your friend would like to hook up with you, would you like to know that? Assuming your friend is not interested, would you like to know that? And would you like your friend to know that you know?

Assuming your friend is interested, would you like your friend to know whether you are interested? Assuming your friend is not interested, same question. And the higher-order question as well.

These questions are eliciting your preferences over you and your friend’s beliefs about (beliefs about…) you and your friend’s preferences. This is one context where the value of information is not just instrumental (i.e. it helps you make better decisions) but truly intrinsic. For example I would guess that for most people, if they are interested and they know that the other is not that they would strictly prefer that the other not know that they are interested. Because that would be embarrassing.

And I bet that if you are not interested and you know that the other is interested you would not like the other to know that you know that she is interested. Because that would be awkward.

Notice in fact that there is often a strict preference for less information. And that’s what makes the design of a matching mechanism complicated.  Because in order to find matches (i.e. discover and reveal mutual interest) you must commit to reveal the good news. In other words, if you and your friend both inform the experimenters that you are interested and that you want the other to know that, then in order to capitalize on the opportunity the information must be revealed.

But any mechanism which reveals the good news unavoidably reveals some bad news precisely when the good news is not forthcoming. If you are interested and you want to know when she is interested and you expect that whenever she is indeed interested you will get your wish, then when you don’t get your wish you find out that she is not interested.

Fortunately though there is a way to minimize the embarrassment. The following simple mechanism does pretty well. Both friends tell the mediator whether they are interested.  If, and only if, both are interested the mediator informs both that there is a mutual interest. Now when you get the bad news you know that she has learned nothing about your interest. So you are not embarrassed.

However it doesn’t completely get rid of the awkwardness. When she is not interested she knows that *if* you are interested you have learned that she is not interested. Now she doesn’t know that this state of affairs has occurred for sure. She thinks it has occurred if and only if you are interested so she thinks it has occurred with some moderate probability. So it is moderately awkward. And indeed you know that she is not interested and therefore feels moderately awkward.

The theoretical questions are these:  under what specification of preferences over higher-order beliefs over preferences is the above mechanism optimal? Is there some natural specification of those preferences in which some other mechanism does better?

Update: Ran Spiegler points me to this related paper.

A firm has a basic goal:  maximize profits.  And then it has day-to-day decisions. It is far too complicated to every day try to trace through the consequences of those basic decisions on the fundamental objective of maximizing profits. A manager who tried to do that would spend so much time thinking that by the time he figured it out the day would be over and he’d have to start thinking again about tomorrow’s decision.

So firms don’t hire managers like that. Managers cling to intermediate goals, like say maximize market share. The best intermediate goals are the ones that are easy to monitor and which do a pretty good job of proxying for the underlying goal. These intermediate goals eventually become part of the culture of the firm and knowledge of their connection to the underlying goal can get lost. The manager can’t distinguish between intermediate goals and fundamental goals.

Now a consultant comes in to advise the manager. A consultant’s job is to show the manager how best to pursue his goals. So the very first thing a consultant should do is find out what the manager’s goals are. And here’s where the dilemma arises. The consultant might actually be smart enough to figure out that the manager’s goals are just intermediate goals. Does he say “De Gustibus” and advise the manager on how to pursue his goals even if he can see that in this particular instance it works against what the manager should really be maximizing?

Or does he have enough ambition in his job as advisor to try to convince the manager that his goals are all wrong, that he should really be maximizing something else? I honestly wonder what the smart consultant does in these situations.

More generally, in everyday life we have arguments about what’s the right thing to do. A lot of the time these arguments are confounded by the inability to distinguish whether we are arguing about the right course of action given our common goals (an argument that can be settled) or whether we have really just chosen different intermediate goals (loggerheads.)

Presh Talwalker tells us about this study of parking strategies:

They observed two distinct strategies: “cycling” and “pick a row, closest space.” They compared the results. “What was interesting,” [Professor Andrew Velkey found], “was although the individual cycling were spending more time driving looking for a parking space, on average they were no closer to the door, time-wise or distance-wise, than people using ‘pick a row, closest space.’”

And commenters are inferring that hunting for the best spot is a sub-optimal strategy.  But those that are searching for the best parking spot are not interested in reducing their expected parking time, rather they care about the second moment.  When we have an appointment there is a deadline effect:  our payoff drops precipitously if we arrive past the deadline.  Faced with such a payoff function we are typically wiling to increase our expected parking time if in return we can at least increase the probability of getting lucky with a really good spot.  “Pick a row, closest space” guarantees we will be a bit late.  “Cycling” may increase the average searching time but at least gives us a chance of being on time.

Dr. Doom did not get approval for the tub from the Department of Buildings, which resulted in the violation. He’s been ordered to remove not only the tub, but also the deck and party room (replete with a bar and bathroom) which he had constructed on the roof of his $5.5 million East First Street pad. The ruling apparently came about after a complaint levied in February.

If you’re still grappling to get a sense of what will be lost now that these parties—at least, in the form they previously inhabited—will cease to exist, here’s a wonderful quote Roubini gave toNew York which paints quite the picture of both his allure and the nature of the shindigs.

“[The models who attend my parties] love my beautiful mind. I am ugly, but they’re attracted to the brains. I’m a rock star among geeks, wonks and nerds,” he said. “[What makes the parties so great are] fun people and beautiful girls. I look for 10 girls to one guy.”

The full story is here.

  1. Exercise: find a name such that when you sing The Name Game (“banana fana fo …”) all three words you get are insults.
  2. The Northwestern Women’s Lacrosse team has won the NCAA championship like every year but two in the past decade.  The two losses make the overall dynasty more impressive.  Discuss.
  3. Why do fat people slide farther when they reach the bottom of a water slide?
  4. When hiking in a group, if an accurate measure of (changes in) elevation is unavailable but you have a watch and a GPS it’s better to share the work of carrying the backpack by dividing the time rather than the distance.

You are walking back to your office in the rain and your path is lined by a row of trees. You could walk under the trees or you could walk in the open. Which will keep you drier?

If it just started raining you can stay dry by walking under the trees. On the other hand, when the rain stops you will be drier walking in the open. Because water will be falling off the leaves of the tree even though it has stopped raining. Indeed when the rain is tapering off you are better off out in the open. And when the rain is increasing you are better off under the tree.

What about in steady state? Suppose it has been raining steadily for some time, neither increasing nor tapering off. The rain that falls onto the top of the tree gets trapped by leaves. But the leaves can hold only so much water. When they reach capacity water begins to fall off the leaves onto you below. In equilibrium the rate at which water falls onto the top of the tree, which is the same rate it would fall on you if you were out in the open, equals the rate at which water falls off the leaves onto you.

Still you are not indifferent: you will stay drier out in the open. Under the tree the water that falls onto you, while constituting an equal total volume as the water that would hit you out in the open, is concentrated in larger drops. (The water pools as it sits on the leaves waiting to be pushed off onto you.) Your clothes will be dotted with fewer but larger water deposits and an equal volume of water spread over a smaller surface area will dry slower.

It is important in all this that you are walking along a line of trees and not just standing in one place. Because although the rain lands uniformly across the top of the tree, it is probably channeled outward away from the trunk as it falls from leaf to leaf and eventually below. (I have heard that this is true of Louisiana Oaks.) So the rainfall is uniform out in the open but not uniform under the tree. This means that no matter where you stand out in the open you will be equally wet, but there will be spots under the tree in which the rainfall will be greater than and less than that average. You can stand at the local minimum and be drier than you would out in the open.

Why are conditional probabilities so rarely used in court, and sometimes even prohibited?  Here’s one more good reason:  prosecution bias.

Suppose that a piece of evidence X is correlated with guilt.  The prosecutor might say, “Conditional on evidence X, the likelihood ratio for guilt versus innoncence is Y, update your priors accordingly.”  Even if the prosecutor is correct in his statistics his claim is dubious.

Because the prosecutor sees the evidence for all suspects before deciding which ones to bring to trial.  And the jurors know this.  So the fact that evidence like X exists against this defendant is already partially reflected in the fact that it was this guy they brought charges against and not someone else.

If jurors were truly Bayesian (a necessary presumption if we are to consider using probabiilties in court at all) then they would already have accounted for this and updated their priors accordingly before even learning that evidence X exists.  When they are actually told it would necessarily move their priors less than what the statistics imply, perhaps hardly at all, maybe even in the opposite direction.

A balanced take in the New Yorker.  Here is an excerpt.

A core objection is that neuroscientific “explanations” of behavior often simply re-state what’s already obvious. Neuro-enthusiasts are always declaring that an MRI of the brain in action demonstrates that some mental state is not just happening but is really, truly, is-so happening. We’ll be informed, say, that when a teen-age boy leafs through the Sports Illustrated swimsuit issue areas in his brain associated with sexual desire light up. Yet asserting that an emotion is really real because you can somehow see it happening in the brain adds nothing to our understanding. Any thought, from Kiss the baby! to Kill the Jews!, must havesome route around the brain. If you couldn’t locate the emotion, or watch it light up in your brain, you’d still be feeling it. Just because you can’t see it doesn’t mean you don’t have it. Satel and Lilienfeld like the term “neuroredundancy” to “denote things we already knew without brain scanning,” mockingly citing a researcher who insists that “brain imaging tells us that post-traumatic stress disorder (PTSD) is a ‘real disorder.’ ”

And

It’s perfectly possible, in other words, to have an explanation that is at once trivial and profound, depending on what kind of question you’re asking. The strength of neuroscience, Churchland suggests, lies not so much in what it explains as in the older explanations it dissolves. She gives a lovely example of the panic that we feel in dreams when our legs refuse to move as we flee the monster. This turns out to be a straightforward neurological phenomenon: when we’re asleep, we turn off our motor controls, but when we dream we still send out signals to them. We really are trying to run, and can’t.

He died earlier this week.  If you grew up in Southern California, and you watched TV, you may have forgotten Cal Worthington but his dog Spot, the acres and acres of cars, the “Go See Cal”, the giant selection of cars and trucks on sale, the “open every day til midnight” and the music in the way “nineteen” springboarded the cars vintage out of your set and into your ears are all still stored away in some synapses somewhere in there and they’re all gonna come flowing out when you watch this video and probably bring with them a whole bunch of other stuff lost in there that you are gonna be pretty tickled to find again.  RIP Cal Worthington.

Should restaurants put salt shakers on the table?  A variety of food writers weigh in on the question here.

The naive argument is that salt shakers give diners more control. They know their own tastes and can fine tune the salt to their liking. The problem with this argument is that salt shaken over prepared food is not the same as salt added to food as it is cooked.  A chef adds salt numerous times through the cooking process to different items on the plate because some need more salt than others.

So the benefit of control comes at the cost of excess uniformity in the flavor. But beyond that, there is an interesting strategic issue. When there is no salt shaker on the table the chef chooses the level of saltiness to meet some median or average diner’s taste for salt. All diners get equally salty food independent of their taste. Diners to the left of the median find their dish too salty and diners to the right wish they had a salt shaker.

A reduction in the level of saltiness benefits those just to the left of the median at the expense of those far to the right and at an optimum those costs outweigh the benefits.

But when there is a salt shaker, the chef can reduce the level of saltiness at a lower cost because those to the right can compensate (albeit imperfectly) by adding back the salt. So in fact the optimal level of salt added by a chef whose restaurant puts salt shakers on the table is lower.

So the interesting observation is that salt shakers on the table benefit diners who like less salt (and also those that like a lot of salt) at the expense of the average diner (who would otherwise be getting his salt bliss point but is now getting too little).

There are two rationales for a limited strike on Syria: (1) Deter Assad from using chemical weapons again and (2) Send a signal to Iran that the US will enforce a red line against nuclearization.

The implicit threat of a tough response from the principal if an agent takes a Bad action must be coupled with the promise that there will a soft action if he takes the Good action. If the principal always takes the tough action as he is a hawkish type or always takes the soft action as he is a dovish type, the agent’s incentives are not responsive to the principal’s strategy. In the absence of incentives, the Bad action is optimal for the agent. The principal’s welfare is low because the agent takes the Bad action. The principal has to signal he is a coordination type to truly change the agent’s incentives.

Voters don’t like war just for the sake of it – they pay the costs and see little benefit (Kantian peace). But they can be convinced to go to war if there is a serious national security threat. There are coordination types. By going to Congress, the President imports the preferences of the median voter. The agent knows that the Good action is more likely to be met with a soft response and a Bad action with a tough response. The agent responds is more likely respond with a Good action. So the President’s payoff goes up whatever his true type. Hence, going to Congress is a great idea for the President whether he is hawkish, dovish or coordination type.

Imagine that the President convenes his top economic advisors to get a recommendation on a pressing policy issue. They say unequivocally “do X.” The President asks why and they say “its complicated. Do X.” The President, not happy with that, decides he is going to read the economic literature on the pros and cons of doing X. After a thorough study he comes back to his advisors and says “You economists don’t understand your own science. I read the literature and I should do Y.”

I think we would agree that’s a bad outcome. For probably exactly the same reason that Doctors don’t seem to be happy with economist Emily Oster’s apparent advice to pregnant women to drink alcohol “like a European adult.”

But let’s assume that Emily truly can interpret the published statistical literature better than her Obstetrician. There is another reason to question her recommendations.

An advisor’s job is to advise on the risks of an activity. Because the advisor is the expert on that. The decision-maker is the expert on her own preferences. The correct decision is based on weighing both of these.

A recommendation to have up to a glass of wine per day while pregnant confounds the two sides. What it really means is “I like wine a lot.  I also read about the risks and decided that my taste for wine was strong enough that I am willing to live with the risks.” Thus her recommendation amounts to “If you like wine as much as I do you should drink up to a glass per day when you are pregnant.”

When I asked my doctor about drinking wine, she said that one or two glasses a week was “probably fine.” But “probably fine” isn’t a number.

The problem is that there is no way to quantify how much she likes wine and so no way for her readers to know whether they like wine as much as she does. Likewise it is too much for Emily to demand her doctors to say much more than “probably fine.”

The doctors’ advice is based on some assumption about the patient’s taste for wine weighed against the risks. Emily’s advice is based on a different assumption. As for the risks, when Emily reads the literature and concludes that the evidence is weak of the danger of drinking alcohol she then jumps to the conclusion that it is weaker than what the doctors thought. She makes the identifying assumption that their recommendation was conservative because they overestimated the risks and not because they underestimated her taste for wine. But there does not seem to be any basis for that assumption because her doctors never told her what they believed the risks to be and they never asked her how much she likes wine.

One of my favorite subjects is woven through the highly entertaining This American Life segment about Emir Kamenica.  I highly recommend listening.  Unrelated to the main story, at the very beginning Michael Lewis details a very nice defense of plagiarism:

The concept was alien to me, I mean I just thought it was an odd concept because you repeat what other people say all the time, I was just repeating what someone else said, it was a very intelligent thing to repeat. And I thought I was saving us a lot of trouble… save him the trouble of having to read something really awful and I wouldn’t have to write a boring book report or even read the boring book and so I was doing both of us a favor.  And it seemed sortof counterintuitive to have to generate a thing that had already been done.

Our garbage cans sit on a back alley that is shared with a large apartment building. Last week, I found that our bins were full of trash left by a couple of people from the building. Their names and apartment number were on several Amazon boxes so I left them a note saying “Please do not dump your trash in our garbage cans. If you carry on doing it, I’ll call the City and complain.” Next morning, when I went out to the alley, I discovered several mattresses, a bed frame and other furniture.

I was attempting deterrence – “If you do x, then I will punish you with y” – but instead I caused escalation. I carried out my threat but it seems my erstwhile neighbors had moved out so my threat had no bite. This is an example of a generic problem in international relations – you take an action that is meant to deter but it backfires and causes escalation. We face a similar problem in Syria.

First, there is an international “norm” against the use of chemical weapons. Implicitly, it contains the threat that anyone who uses chemical weapons will face punishment of some form. The international community wants to make sure Assad does not use chemical weapons again, so someone has to step up and punish him. Or so the argument goes.

Second, there is the issue of “reputation”. The President threatened Assad with repercussions if he crossed  a “red line” on the use of chemical weapons. We also threatened Iran with repercussions if they cross their own red line with nuclear development. So, to maintain our credibility with Iran, we have to carry out our threat to punish Assad.

This akin to the reputation model of the chain store paradox as studied by Kreps and Wilson. A chain store faces entrants in many towns. If accommodation is cheaper than fighting in any one town and these payoffs are common knowledge, there is no predation via a backward induction argument. But if the chain store might be run by a “crazy” entrepreneur who loves to fight entry, a “rational” type will pretend to be crazy. Since both crazy and rational types fight entry, entrants should stay out.

Something like this argument lies beneath the “red line” argument for a limited strike against Assad.

First and foremost, we can attack Syria even if they do/did not use chemical weapons. In the chain store paradox this cannot happen – the chain store fights entry if it occurs but it can’t just fight for the hell of it if entry does not occur. In Syria, we can try for regime change and employ the use of chemical weapons as an excuse to intervene militarily. We can do this even if Assad backs down. This may seem farfetched to us but after the experience in Iraq and Libya as a pose to the survival of the regime in North Korea, this does not seem implausible to outsiders. So, if Assad thinks American will attack whatever he does, this does not increase his incentive to back down. Expecting attack, he might fight harder.

Plus Iran get the same signal – America wants regime change. So, they will redouble their efforts to go nuclear.

This is as plausible a forecast of future events as any other.

Roy is coming to plant flowers in Zoe’s garden. Zoe loves flowers, her utility for a garden with x flowers is

z(x) = x.

Roy plants a unit mass of seeds and the fraction of these that will bloom into flowers depends on how attentive Roy is as a gardener. Roy’s attentiveness is his type \theta. In particular when Roy’s type is \theta, absent any sabotage by Zoe, there will be \theta flowers in Zoe’s garden in Spring. Roy’s attentiveness is unknown to everyone and it is believed by all to be uniformly distributed on the unit interval.

Jane, Zoe’s neighbor, is looking for a gardener for the following Spring. Jane has high standards, she will hire Roy if and only if he is sufficiently attentive. In particular, Jane’s utility for hiring Roy when his true type is \theta is given by

j(\theta) = \theta - 2/3.

(Her utility is zero if she does not hire Roy.)

Roy tends to one and only one garden per year. Therefore Roy will continue to plant flowers in Zoe’s garden for a second year if and only if Jane does not hire him away from her.

Consequently, Zoe is contemplating sabotaging Roy’s flowers this year. If Zoe destroys a fraction 1 - \alpha of Roy’s seeds then the total number of flowers in Zoe’s garden when Spring arrives will be x = \alpha\theta. Of course sabotage is costly for Zoe because she loves flowers.

There will be no sabotage in the second year because after two years of gardening Roy goes into retirement. Therefore, if Zoe destroys 1-\alpha in the first year and Roy continues to work for Zoe in the second year, Zoe’s total payoff will be

z(\alpha\theta) + z(\theta)

whereas if Roy is hired away by Jane, then Zoe’s total payoff is just z(\alpha\theta).

This is a two-player (Zoe and Jane) extensive-form game with incomplete information. The timing is as follows. First, Roy’s type is realized. Nobody observes Roy’s type. Zoe moves first and chooses \alpha \in [0,1]. Then Spring arrives and the flowers bloom.  Jane does not observe \alpha but does observe the number of flowers in Zoe’s garden. Then Jane chooses whether or not to hire Roy away from Zoe. Then the game ends.

Describe the set of all Perfect Bayesian Equilibria.

I haven’t decided yet and I can’t figure out which side this is evidence for:

Me:  Oh I have to remember to set up your desk today because I promised that I would and that if I didn’t I would give you $2.

7 year old:  I was hoping you would forget.

Me:  Are you saying you would rather have $2 than your desk?

7yo:  No, I am saying I would rather have $2 today and my desk tomorrow.

Me:  Hold on, what would you rather have:  $2 today and your desk tomorrow or $2 today, another $2 tomorrow and then your desk the next day?

7yo:   $2 today, another $2 tomorrow and then my desk the next day.

Me:  $2 today, $2 tomorrow, $2 the next day, and then your desk the day after that?

7yo:  Yep.

Me:  And what is the number of days you would like to have $2 before you finally get your desk?

7yo:  Infinity.

Jeff’s Twitter Feed

  • 9. Throwin Stones 10. Not Fade Away encore: And We Bid You Goodnight #FareTheeWell #setlistguesses 32 minutes ago
  • Second Set 1. Aiko 2. Samson and Delilah 3. Estimated Prophet -> 4. Eyes 5. Drums/Space 6. China Cat-> 7. Rider 8. Terrapin 33 minutes ago
  • First Set: 1. Touch of Grey 2. Big River 3. GTRFB 4. Greatest Story Ever Told 5. Candy Man 6. Cassidy #FareTheeWell #setlistguesses 37 minutes ago
  • In hot pursuit of happiness when I slam into a false cave painted on the side of a mountain rock. 1 day ago
  • *scans a bag of Funyuns* *swipes card with a flourish* *points to the sky and gives all glory to God Jehovah* 4 days ago

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 1,740 other followers

Follow

Get every new post delivered to your Inbox.

Join 1,740 other followers